The U.S. Senate Finance Committee Thursday approved a bill to reform Medicare, the health care insurance program for the elderly and the disabled, which would pay the same amounts for hospital services in Puerto Rico as are paid else where in the nation.

Currently the payments in Puerto Rico are based 50 percent on the national rates and 50 percent on local cost factors. The special formula provides lower federal payments.

Estimates of the additional funding range from $50 million to $75 million a year. The equal payments would begin in 2005.

The bill also included approximately $9.25 million more than originally planned for prescription drugs for Puerto Ricans who qualify for Medicaid, the health care insurance program for low-income individuals, as well as for Medicare. The primary purpose of the bill is to add a subsidy for prescription drugs outside of hospitals to Medicare.

The Puerto Rico proposals were made by Committee Chairman Chuck Grassley (R-IA) and senior Democrat Max Baucus (D-MT) at the request of Committee members John Kerry (D-MA) and Rick Santorum (R-PA). The proposals were also made with the support of member John Breaux (D-LA), who had worked with Grassley and Baucus in crafting their original bill. The proposals were approved without discussion.

The original Grassley-Baucus bill -- a major bipartisan breakthrough on legislation that dates to a proposal by President Clinton a decade earlier and has been stalemated for years -- did not include any increase in funding for Puerto Rico Medicare hospitalization. It also had a lesser amount -- $18.5 million for prescription drugs for Puerto Ricans who qualify for Medicaid as well as Medicare. The lack of a hospitalization payments increase for Puerto Rico was a particular disappointment since there had been bipartisan support for an increase since one was initially proposed by Clinton in 2000.

A source who worked on the issue suggested that it had been overlooked because Puerto Ricos official representative to the Congress, Resident Commissioner Anibal Acevedo Vila ("commonwealth" party/D), and Governor, Sila Calderon ("commonwealth"/ no national party), had not devoted much of an effort to lobbying for an increase.

When Acevedo and Calderon failed to get an increase included in the bill, others sprang into action, including Manuel Ortiz, who: lobbies in Washington for San Juan Mayor Jorge Santini (statehood/R); coordinates the gubernatorial candidacy of former Puerto Rico Governor Pedro Rossello (statehood/D) in the States; and is involved in Kerrys presidential campaign. He got Kerry to propose an amendment for equality for Puerto Rico -- which became key to the final result -- and obtained support from Breaux.

Others playing key roles in obtaining support for equality were: the Puerto Rico Hospital Association, with the help of a former aide to Romero and Rossello, Luis Baco, now a Washington lawyer; the National Puerto Rican Coalition, an umbrella group primarily consisting of organizations of individuals of Puerto Rican origin in the States; and United Health Care, a Pennsylvania company that does a substantial amount of business in Puerto Rico.

These lobbies have been working on the issue for years. They enlisted Santorum -- who represents Pennsylvania and is attentive to constituents of Puerto Rican origin -- as a co-sponsor of the Kerry proposal. The Kerry-Santorum combination got Grassley and Baucus to agree.

A key argument that they made in seeking equality is that Puerto Ricans pay the Medicare tax equally with residents of other parts of the nation.

Critical to the success of their effort was that the original Grassley-Baucus bill was estimated to cost $351 billion over 10 years. The congressional budget for the fiscal year that begins October 1 had estimated the cost of the legislation at $400 billion over 10 years. This meant that $49 billion in costs would be added to the original bill without creating a budget problem -- including requiring a supermajority of 60 votes to pass the bill in the Senate versus a simple majority of 51. A supermajority is difficult to obtain on a controversial measure because of the almost even split between Democrats and Republicans in the 100-member Senate.

An increase is also expected to be proposed by House of Representatives Ways and Means Committee Chairman Bill Thomas (R-CA) in a Medicare reform/prescription drug benefits bill that could be considered by the House committee next week. Several lobbyists for an increase have been working on the issue with Committee members, including Health Subcommittee Chairwoman Nancy Johnson (R-CT) and Representative Jim McCrery (R-LA) as well as senior Democrat Charles Rangel (D-NY).

The increase has been expected to change the Puerto Rico payments formula to 75 percent national rates/25 percent local cost factors. The same individuals and groups who got the Senate committee to approve equality have had the greatest impact in obtaining support from members of the House committee for an increase.

A challenge that they face in the House, however, is that conservative House Republican leaders want to trim $18 billion in costs from the draft Ways and Means Committee bill by reducing increases in Medicare payments for hospital services.

For many years, Medicare payments for hospitalization services in Puerto Rico were based 25 percent on national rates and 75 percent on local cost factors. The originators of the formula felt it was fairer than simply applying national rates because key costs of services in Puerto Rico -- especially salaries for hospital staff -- were far lower than the national average. They actually would have preferred a national payments system that adjusted payment amounts based on local costs.

Such a system was not politically viable because of the votes in Congress of areas with costs that were lower than the national average. Advocates of it and, simply, holding down Medicare costs were able to impose the formula on Puerto Rico, however, because the territory of 3.8 million U.S. citizens does not have voting representation in Congress.

The formula was changed in 1997 at the insistence of the Clinton White House and with the assistance of key members of Congress, including Rangel, Breaux, then House Hispanic Caucus Chair Xavier Becerra (D-CA), Senator Bob Graham (D-FL), and others. Clinton became committed to an increase after being lobbied for equality by then Resident Commissioner Carlos Romero-Barcelo (statehood/D), the Puerto Rico Hospital Association led by Dr. Richard Machado, and then Governor Pedro Rossello.

Also helpful in lobbying were the New York Hospital Association, which was concerned about the caseload imposed on New York hospitals due to inadequate funding of services in Puerto Rico, and the Puerto Rico Associations lobbyists at a firm called the Washington Group.

The 1997 change, which included an improvement in the calculation of the local cost factors, provided $44 million more for hospitalization in Puerto Rico the first year alone.

In 2000, Clinton, after further lobbying by Romero, the Hospital Association, and Rossello proposed changing the formula to 75 percent national rates and 25 percent local costs in major legislation to reform Medicare and provide an outpatient prescription drug benefit. The Puerto Rico proposal won bipartisan support, especially on the Republican side from Santorum, who was lobbied by the Puerto Rico Hospital Association and Rossello.

The proposal was blocked, however, by the then Majority Leader of the Senate, Trent Lott (R-MS), who has long worked closely on Puerto Rico issues with Calderon and Acevedo because of his opposition to statehood for the territory and his friendship with Calderons lead lobbyist in Washington, Republican operative Charlie Black. In addition, the overall legislation was stymied by partisan wrangling between Republicans and Democrats on the issue, opposition from drug manufacturers, and other problems.

There now seems to be a consensus among political leaders of both parties and interest groups including the drug industry that the compromises necessary to finally pass a bill into law should now be made. The consensus has been fueled by Republican control of the agenda of both houses of the Congress and a push from a president of the same party.

The legislation being developed in both houses does not, however, meet President George Bushs initial primary objective of using an outpatient prescription drug benefit to lure people away from a reliance on Medicare to private insurance plans to reduce costs. The objective recognizes that the program financed by a special tax will be under-funded in coming decades as the post World War Two baby boom generation fully enters retirement.

Instead, the legislation would provide equal prescription drug subsidies under both Medicare and private insurance plans. Bush seems to be willing to accept such a compromise.

Acevedos lackluster performance in Congress on the issue is far different from the image that he has tried to project in Puerto Rico regarding it. After being elected in 2000 -- and after being prompted by the Hospital Association -- he reintroduced the 75 percent /25 percent proposal and tried to claim it as his own -- although he inaccurately described it in speaking to reporters as recently as late last year. This week, he had less to do with the progress on the issue than he did with press releases that suggested that he had made a major contribution to the progress really won by others.

New Territories Staffers In Committees

Much of the substantive work of the Congress is done by members of the professional staff of its committees. Over the coming weeks, there will be new people in three of the four key positions dealing with overall policy regarding Puerto Rico and the other territories of the United States in the lead committees on territorial matters.

One of the three will be a veteran of the issues: Allen Stayman, who will become the lead Democratic -- Minority -- aide on territorial affairs for the lead U.S. Senate committee, the Committee on Energy and Natural Resources. Stayman was the Committees lead Democratic aide on the issues for several years through 1993, when he became the number two officer of the Department of the Interiors office that provides special assistance to the four territories of the U.S. other than Puerto Rico: American Samoa, Guam; the Northern Mariana Islands; and the U.S. Virgin Islands.

A Deputy Assistant Secretary of the Interior, he later headed the office. Even later, he moved to the Department of State to negotiate an additional 15 years of aid to two nations freely associated with the U.S., the Federated States of Micronesia and the Republic of the Marshall Islands. The Central Pacific nations formerly were territories that the U.S. administered on behalf of the United Nations after seizing the islands from Japan during World War Two.

Stayman was replaced as negotiator in 2001 by the Bush Administration. Since then, he has worked at an energy conservation organization.

Energy conservation is another area of his expertise and he will also assist Committee Democrats headed by Jeff Bingaman (NM) on energy issues. Stayman was originally appointed to the Committee staff in the 1980s by Republicans to work on energy conservation matters.

He is primarily being brought back to the Committee to scrutinize legislation to approve the 15-year aid commitment to the Marshall Islands and Micronesia that the Bush Administration negotiated after it replaced him. He will take over advising Committee Democrats on territorial affairs from Kira Finkler, who is scaling back her work on the staff after becoming a mother.

Stayman was a key adviser to the Committee under then Chairman J. Bennett Johnston as it considered legislation to enable Puerto Ricans to choose the territorys future political status from 1989 until 1991. A serious and careful policy adviser, Stayman has pointed out the flaws in unrealistic "commonwealth" status proposals for Puerto Rico and other territories. At the same time, he has not evidenced a preference among any of the three political status options of Puerto Rico that would provide its residents with national government democracy: independence; free association; and statehood.

In this regard, his views fit in with Committee senior Democrat Bingaman, who referred to the Puerto Rico "commonwealth" partys status proposal as "the free beer and bar-b-que option."

Stayman is to rejoin the Committee staff just after its senior adviser on territories matters -- the longest-serving aide on the issues on Capitol Hill -- retires. Committee Majority Counsel Jim Beirne has been working for Republican chairmen for years but originally was a Democratic staffer. He has worked for the Committee for over three decades. Extremely knowledgeable on the issues and a superb legislative tactician, he kept a low profile and tried not to offend Puerto Rico "commonwealthers" even as he rejected most of their ideas.

Beirne is being replaced by Kellie Donnelly of the Committee staff, whom he has been tutoring on the issues. She will primarily work under Chairman Pete Domenici (R-NM), a supporter of Puerto Ricans choosing the territorys status from among realistic options.

There are also new territories aides on the staff of the House of Representatives committee, Resources, under a chairman who has also supported Puerto Ricos status choice legislation, Richard Pombo (R-CA). Chris Fluhr was recently named to head a Committee office on Native American and Insular Affairs.

Flur previously worked under Committee Chairman James Hansen, a strong supporter of the now-closed U.S. Navy range on the island of Vieques, PR and a strong critic of proposals of Puerto Rico Governor Sila Calderon ("commonwealth"/no national party). Chris Foster, who has been an assistant to Representative Mary Bono (R-CA), will soon join the office to work on territories matters.